A central bank digital currency (CBDC) in the UK is “likely to be needed,” the Bank of England’s Deputy Governor for financial stability has claimed. During a Treasury select committee
hearing this week, Sir Jon Cunliffe was asked to rank the likelihood of a digital pound coming to the UK on a scale of one to 10. The Deputy Governor answered that it was “more than five” before later saying that his “private” view was 7 “and maybe higher”.
“The difficulty is if we just wait until it’s 9 out of 10, then we are five years away at least,” he said. “This would be a very serious thing that would be resilient, fraud-proof and secure. If we just wait until we say ‘okay, now we think it’s needed’, we will be five years behind.” Cunliffe added that the Bank of England currently does not have the technical skills to create a CBDC, but he “hoped” to develop them in the next phase.
When probed about why the UK needed a digital pound, the Deputy Governor asserted that it was the wrong question to ask: “If you do a static thing like ‘what is it that I can’t do now that I know I want to do – what hole in the current landscape would it fill?’ I don’t think you get to an answer for having a CBDC now,” he replied. Instead, the CBDC offered a “new frontier” in payments that would be comparable to when the iPhone first launched:
The iPhone launched with 15 apps… By the time they launched the App Store a year or two later, it had 8000 apps. Now it has several million. This is not about ‘here is a particular thing that needs to be done’ — it is about opening a new frontier for people to improve payments and the way in which money is used in how we transact.
– SIR JON CUNLIFFE
Cunliffe admitted that he did not know how a CBDC would reduce fraud, promising to “look into it” during the next phase. He then told MPs that a CBDC would be different from cryptocurrencies like Bitcoin because it was a digital bank note with “all the security that it provides rather than a speculative asset”.
Further concerns were raised over what limits a CBDC would impose on individual freedom. “The bank will have the power to peer into people’s transactions and the currency will be programmable,” said Danny Kruger MP, “meaning that people could be influenced or coerced into making certain payments and not other sorts.” Kruger cited the case of the Canadian truckers, who blockaded Ottawa in protest at the Government’s Covid-19 restrictions. In response, Prime Minister Justin Trudeau invoked emergency powers and froze the bank accounts of those participating in the convoy. Cunliffe was asked if something similar could happen in the UK, to which he responded that it was for Parliament to “set the constraints in which that happens”:
Whether you can trust the government to observe the constraints Parliament sets or whether you can trust Parliament to set the right constraints is not a question for central banks…The Government has all sorts of possibilities to interfere with the technology and the way people use money. The reason is to do with the strength of democratic institutions and the choices we make.
– SIR JON CUNLIFFE
This week the Bank of England began its second phase in CBDC research. This is expected to take around two to three years, after which it will decide on whether to proceed to the next stage. The Bank has suggested that ‘Britcoin’ could feasibly be ready by 2030.
So refusing to say why he wants to spend taxpayers money on something we don’t need. Obviously must be in our best interests.
www.bbc.co.uk
